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The decline in oil prices accelerated during the fourth quarter of 2014. The main culprit was a supply and demand imbalance. Increased production in the United States, which is currently the biggest oil producer in the world, means there is an ample supply of oil. However, slowing growth in China and other countries, along with relatively warm winter weather in the United States, has lowered demand.

Oil prices are also affected by expectations. The Organization of Petroleum Exporting Countries’ (OPEC’s) fourth-quarter decision to maintain production levels and market share (rather than lowering production and pushing prices higher) has created an expectation that prices may remain low for some time.

Low oil prices are expected to be a boon for the world economy, consumers, and countries (like India) that are heavily dependent on oil imports. However, low prices are a detriment to countries that are heavily dependent on oil exports and could result in financial crises and geopolitical upheaval. The Economist reported analysts believe Russia needs oil to be priced at $100 a barrel to meet its 2015 budget. Venezuela, which was in financial trouble before oil prices fell, needs oil at $120 a barrel to finance its spending, and Iran needs prices even higher, at $136 a barrel.

Big trouble in Russia

Like Mentos® and soda pop, a currency crisis fizzed up in Russia during the fourth quarter. The Economist said:

“In the world of central banking slow, steady, and predictable decisions are the aim. So when bankers meet in the dead of night and raise interest rates by a massive 6.5 percentage points it suggests something is going very wrong. It is: the Russian currency crisis many feared is now a reality… and the mood in Moscow close to panic. Russians are right to worry: they are heading for a lethal combination of deep recession and runaway inflation.”

Retailers have begun re-pricing their goods daily and ruble jokes are proliferating, according to The Moscow Times. One example, “I’m investing my life savings in the Euro.” “Don’t you mean Euros?” “No, just one Euro. It’s all I can afford.”

Déjà vu Greece

The potential for a Euro crisis reared its ugly head (again). Greek markets took a decidedly pessimistic turn when the country’s government decided to hold elections. At issue are promises Alexis Tsipras, presidential candidate of the Syriza party, made about rolling back austerity measures and cancelling a portion of Greek debt. If Tsipras is elected, Greece might leave the Euro.

Signs of volatility in U.S. markets

Markets sparked and popped a bit in the United States during the fourth quarter. Investors, who had been unconcerned about the possibility of short-term market volatility for much of 2014, had a change of heart during October – the same month the Federal Reserve ended quantitative easing.

The Chicago Board Options Exchange’s Volatility Index (VIX), which is also known as Wall Street’s fear gauge, rose into the 20s (above its long-term historic average of 19.6) for several days. Stock markets experienced big swings, too, and then things settled back down. The VIX shot higher for a few days in December, as well. Experts say these microbursts may continue into 2015.

Data as of 1/2/15

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-1.5%

0.0%

12.4%

17.2%

12.7%

5.5%

10-year Treasury Note (Yield Only)

2.1

NA

3.0

2.0

3.8

4.2

Gold (per ounce)

-1.1

-2.3

-2.0

-9.8

0.9

10.6

Bloomberg Commodity Index

-2.5

-0.5

-17.2

-10.4

-6.1

-3.2

DJ Equity All REIT Total Return Index

0.2

1.4

30.1

16.6

17.1

8.6

S&P 500, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

When you were younger, you may have heard older relatives marvel over the high cost of everything from automobiles to aluminum foil. It’s worth taking a look back, once in a while, and acknowledging exactly how significantly the world has changed.

Let’s begin by picturing the United States at the beginning of the twentieth century. One-quarter of households had running water and outhouses were more prevalent than flush toilets. Few people owned homes. Less than 10 percent of households had gas or electric lights, 5 percent had telephones, about 1 percent owned a car, and nobody owned a television because they didn’t exist yet.

Approximate household income:

1901: Average household income was about $750 a year. Almost 96 percent of households had income earned by men, 8.5 percent had income earned by women, and 23 percent had income earned by children.

1960-61: Average household income was about $6,691 a year. Almost 34 percent of women were working and 83.3 percent were men. Almost 39 percent of heads of household were craftsmen and machine operators, and 27 percent were professionals, managers, or proprietors.

2013: The mean after-tax household income in the United States was $56,352.

Approximate household expenses:

1901: The average family spent about $769 a year: $327 on food, $108 on clothing, $179 on housing, and $155 on anything else. On average, households spent 2.5 percent more than they earned. Just 19 percent of families owned homes; 81 percent rented.

1960-61: The average family spent about $5,390 a year: $1,310 on food, $561 on clothing, and $1,590 on housing. Almost three-fourths of Americans owned cars. Fifty-three percent of families owned homes.

2013: Mean household spending was about $51,100: $17,148 was spent on housing; $9,004 on transportation; $6,602 on food; $3,737 on utilities, fuels, and public services; $3,631 on healthcare; $1,604 went to clothing; and so on. About 64 percent of households owned homes.

It’s true. Times really have changed.

Weekly Focus – Think About It

“A bird doesn’t sing because it has an answer, it sings because it has a song.”

–Maya Angelou, American author and poet

Securities offered through NATIONAL PLANNING CORP (NPC), Member FINRA/SIPC. RPG and NPC are separate and unrelated companies.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The DJ/AIG Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

Certain statements contained within are forward-looking statements, including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to know and unknown risks and uncertainties.

No investment strategy can guarantee a profit or protect against a loss. Past performance does not guarantee future results.

Investors should consider their objectives & tolerance for risk. Please consult your financial professional prior to implementing any financial strategy.

a. *Navigating Life’s Transitions was identified on Amazon as a best seller in the Wealth Management category on 10/3/2014. Amazon’s best seller list includes popular products based on sales and is updated hourly. Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors Inc. RPG and Securities America are separate and unrelated companies. Securities America and its representatives do not provide tax or legal advice. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security or product that may be referenced herin. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. The Five Star Wealth Manager award, administered by Crescendo Business Services, LLC (dba Five Star Professional), is based on 10 objective criteria. Eligibility criteria – required: 1. Credentialed as a registered investment adviser or a registered investment adviser representative; 2. Actively licensed as a registered investment adviser or as a principal of a registered investment adviser firm for a minimum of 5 years; 3. Favorable regulatory and complaint history review (As defined by Five Star Professional, the wealth manager has not; A. Been subject to a regulatory action that resulted in a license being suspended or revoked, or payment of a fine; B. Had more than a total of three settled or pending complaints filed against them and/or a total of five settled, pending, dismissed or denied complaints with any regulatory authority or Five Star Professional’s consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority or complaints registered through Five Star Professional’s consumer complaint process; feedback may not be representative of any one client’s experience; C. Individually contributed to a financial settlement of a customer complaint; D. Filed for personal bankruptcy within the past 11 years; E. Been terminated from a financial services firm within the past 11 years; F. Been convicted of a felony); 4. Fulfilled their firm review based on internal standards; 5. Accepting new clients. Evaluation criteria – considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Award does not evaluate quality of services provided to clients. Once awarded, wealth managers may purchase additional profile ad space or promotional products. The Five Star award is not indicative of the wealth manager’s future performance. Wealth managers may or may not use discretion in their practice and therefore may not manage their client’s assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. For more information on the Five Star award and the research/selection methodology, go to fivestarprofessional.com. 5,449 Chicago area wealth managers were considered for the award; 435 (8 percent of candidates) were named 2018 Five Star Wealth Managers. 2017: 3781 considered, 438 winners; 2016: 3,411 considered, 725 winners; 2015: 5,833 considered, 716 winners; 2014: 8,161 considered, 744 winners; 2013: 3,998 considered, 772 winners; 2012: 2,970 considered, 780 winners.